Fear of Unforeseen Chaos Keeps Feds Bailing Out AIG

If you want to understand the phrase “too big to fail,” look no further than AIG, the Los Angeles Times reports. With $1.1 trillion at the end of 2007, operations in 130 countries and 74 million customers, AIG is so entrenched in the global financial system that its failure would trigger brutal reactions—and it’s the unforeseen ones that keep federal help coming.

Risks include the failure of AIG’s healthy life-insurance firms, and of its US-based subsidiaries that collectively are the largest insurer of retirement savings for teachers and health-care workers. But companies such as International Lease Finance, an AIG-owned commercial jet leaser that keeps every major airline flying, are also at risk. “People don’t know the exposure,” one professor says, “so as a result there’s a huge premium on fear and the unknown.” (More AIG stories.)